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F.A.Q. For U.S. Citizens Abroad and Non-resident Aliens

I’m a U.S. citizen living and working outside of the United States for many years. Do I still need to file a U.S. tax return?

Yes, if you are a U.S. citizen or a resident alien living outside the United States, your worldwide income is subject to U.S. income tax, regardless of where you live. However, you may qualify for certain foreign earned income exclusions and/or foreign income tax credits

What is the due date of a U.S. income tax return?

If you are a U.S. citizen or resident alien, who is living outside of the United States you are allowed an automatic 2-month extension until June 15th.

I am a U.S. citizen married to a nonresident alien. What is my filing status and can I claim an exemption for my foreign spouse?

In general, if you are a U.S. citizen or resident alien married to a nonresident alien, you are considered “Married Filing Separately” unless you qualify for a different filing status. If you pay more than half the cost of keeping up a home for yourself and a qualifying child or other relative, you may qualify for the head of household filing status. You and your spouse can also choose to have your spouse treated as a U.S. resident for all U.S. federal income tax purposes. This allows you and your spouse to file a joint return, but also subjects your nonresident alien spouse’s worldwide income to U.S. income tax.

I am a U.S. taxpayer residing abroad and I have a child who was born abroad. Can I claim my child as a dependent on my tax return?

In general, you can claim exemptions for individuals who qualify as your dependents. To be your dependent, the individual must be a U.S. citizen, U.S. national, U.S. resident alien, or a resident of Canada or Mexico for some part of the calendar year in which your tax year begins.

 

What are my responsibilities as a green card holder if I have been absent from the United States for a long period of time?

As a green card holder, you generally are required to file a U.S. income tax return and report worldwide income no matter where you live.

However, if you surrender your green card or the U.S. Citizen & Immigration Service determines that you have abandoned your green card and takes it away from you, you will need to follow the nonresident alien requirements for filing a Form 1040NR, U.S. Nonresident Alien Income Tax Return

What deductions and/or credits am I allowed on my U.S. income tax return as a U.S. citizen living and working in a foreign country?

U.S. citizens and resident aliens living outside the United States generally are allowed the same deductions as citizens and residents living in the United States. If you paid or accrued foreign taxes to a foreign country on foreign source income and are subject to U.S. tax on the same income, you may be able to take either a foreign tax credit on foreign income taxes or an itemized deduction for eligible foreign taxes. However, if you take the foreign earned income exclusion your foreign tax credit or deduction will be reduced.

You may also be eligible for the foreign earned income exclusion and the foreign housing deduction.

If my foreign earned income is below the foreign earned income exclusion threshold amount, am I still required to file a U.S. individual income tax return?

Yes, since the foreign earned income exclusion is voluntary, you must file a tax return to claim the foreign earned income exclusion.  It does not matter if your foreign earnings are below the foreign earned income exclusion threshold.

Do I need to have a tax home in a foreign country in order to claim the foreign earned income exclusion?

Yes. To be eligible for the foreign earned income exclusion, you must have a tax home in a foreign country and be a U.S. citizen or resident alien. You must also be either a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or you must be physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months. U.S. citizens may qualify for the foreign income exclusion under either test. U.S. resident aliens must qualify under the physical presence test, unless they are citizens or nationals of a country with which the United States has an income tax treaty in effect. In that case, U.S. resident aliens also may qualify for the foreign earned income exclusion under the bona fide residence test.

I have been working abroad for many years and claiming the Foreign Earned Income Exclusion using a Form 2555. I claim the Physical Presence test every year. Can you explain the difference between the so-called Physical Presence test and the Bona Fide Residence test?

To be eligible for the foreign earned income exclusion, you must have a tax home in a foreign country and be a U.S. citizen or resident alien. You must also be either a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year (Bona Fide Residence Test), or you must be physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months (Physical Presence Test).

.Whether you are a bona fide resident of a foreign country depends on your intention about the length and nature of your stay.  Evidence of your intention may be your words and acts.  If these conflict, your acts carry more weight than your words.  Generally, if you go to a foreign country for a definite temporary purpose and return to the United States after you accomplish it, you are not a bona fide resident of the foreign country.

The two tests differ in that one is based exclusively on physical presence while the other is based on a taxpayer’s intentions.

Can foreign pensions be excluded on Form 2555?

Foreign pensions cannot be excluded on Form 2555.  Foreign earned income for purposes of the foreign earned income exclusion does not include pensions and annuity income (including social security benefits and railroad retirement benefits treated as social security). 

Who needs to apply for an Individual Taxpayer Identification Number (ITIN)?

You need an ITIN if you are not eligible to get a social security number but must provide a taxpayer identification number on a U.S. tax return or information return.  Examples include the following:​

  • A nonresident alien individual not eligible for an SSN who is required to file a U.S. tax return or who is filing a U.S. tax return only to claim a refund.

  • A nonresident alien individual not eligible for an SSN who elects to file a joint U.S. tax return with a spouse who is a U.S. citizen or resident alien.

  • A U.S. resident alien (based on the substantial presence test) who files a U.S. tax return but who is not eligible for an SSN.

  • An alien spouse who is claimed as an exemption on a U.S. tax return but who is not eligible to get an SSN.

  • An alien individual who is eligible to be claimed as a dependent on a U.S. tax return but who is not eligible to get an SSN. 

  • A nonresident alien student, professor, or researcher who is required to file a U.S. tax return but who is not eligible for an SSN, or who is claiming an exception to the tax return filing requirement.

  • A dependent/spouse of a nonresident alien U.S. visa holder, who is not eligible for an SSN.

ITINs are for federal tax reporting only and are not intended to serve any other purpose. The IRS issues ITINs to help individuals comply with the U.S. tax laws and to provide a means to efficiently process and account for tax returns and payments for those not eligible for Social Security Numbers (SSNs).

An ITIN does not provide authorization to work in the United States or provide eligibility for Social Security benefits or the Earned Income Tax Credit.

When and how do I apply for an Individual Taxpayer Identification Number (ITIN)?

You need an ITIN as soon as you are ready to file your federal income tax return, since you need to attach the return to your application.

I’m a nonresident alien and received a Form 8288-A from the settlement title company or attorney who handled the sale of real property located in the United States that I owned for many years.  Why did I get it and how does it affect me?

In general, the buyer or other transferee of U.S. real property must withhold tax on the sales proceeds when it acquires the U.S. property from a foreign person. This withholding serves to collect U.S. tax that may be owed by the foreign person.

By law, the buyer must withhold 10% of the proceeds from the sale of U.S. real property by a nonresident alien. Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests, is used to report details of the sale, including the amount of U.S. tax withheld, and transmit the information to the seller and the IRS.

The 10% withholding tax may be reduced or eliminated by filing Form 8288-B, Application for Withholding Certificate for Dispositions, by Foreign Persons of U.S. Real Property Interests, with the IRS before the sale of the U.S. real property occurs.

The gain on the sale of your U.S. real property must be reported on Form 1040NR, U.S. Nonresident Alien Income Tax Return. The amount of U.S. federal income tax withheld that is listed on your Form 8288-A must be entered in the Payments section on page 2 of Form 1040NR in order for you to receive credit for the tax withheld.

Do I need to report my foreign bank account to the IRS?

If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, the Bank Secrecy Act may require you to report the account yearly to the U.S. Internal Revenue Service (IRS) by filing FinCEN Report 114, Report of Foreign Bank and Financial Accounts (“FBAR”) (formerly TD F 90-22.1).

Are the Canada Pension Plan and Canadian Old Age Security benefits taxable? 

The taxation of payments received from Canadian retirement programs that are similar to the U.S. Social Security system receive special tax treatment due to an income tax treaty between the United States and Canadian governments. The way this income is taxed depends on the recipient’s residence.

The special tax treatment applies to payments receive from the following Canadian retirement programs: Canada Pension Plan (CPP), Quebec Pension Plan (QPP), and Old Age Security (OAS)

If the recipient is a resident of the United States, the benefits:

  • are taxable only in the United States,

  • are treated as U.S. social security benefits for U.S. tax purposes, and

  • are reported on Form 1040, U.S. Individual Income Tax Return (or Form 1040A) on the line on which U.S. social security benefits would be reported.

If the recipient is a U.S. citizen or lawful permanent resident (green card holder) who is a resident of Canada, the benefits are taxable only in Canada.

I live in a foreign country. How do I get a social security number for my dependent who qualifies for a social security card?

You will need to contact the Social Security Administration. Use Form SS-5-FS, Application For A Social Security Card, which may be obtained from and filed with the Social Security Administration.

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